Treasury Management Services

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Week in Review

Week Ending: Friday, September 8, 2017

Recap & Commentary

Equity markets ended the week lower, following another nuclear weapons test by North Korea and concerns about the impact of Hurricanes Harvey and Irma. Bond prices rose as investors sought safe-haven assets pushing the 10-Year Treasury yield to 2.06, its lowest level since early November. That in turn spurred a selloff in big banks, as lower long-term rates can cut into their profitability. For the week, the S&P Financials sector fell -2.8%.

In a sign of the continued economic recovery in Europe, the European Central Bank (ECB) upgraded its Eurozone growth forecast for 2017 from 1.9% to 2.2%. In explaining the raised forecast, ECB President stated that “The economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors.” If achieved, the 2.2% forecast would represent the strongest growth for the region in a decade. Separately, Draghi also indicated that the ECB will likely decide in October how to proceed with its current bond-buying program. In response to Draghi’s statements, the Euro gained nearly 1% vs. the USD, which fell to its lowest level in nearly three years.

With the threat of a government shutdown looming and the need to increase the nation’s debt ceiling, President Trump surprised members of his own party by striking a deal with Democrats to address both issues. The deal, which also provided hurricane relief aid, will fund the government and raise the debt-ceiling through December 8. One possible drawback to the deal is its potential to complicate what was already slated to be a very busy Congressional calendar moving into year-end.

Economic Bullet Points

Data out of the factory sector was positive despite a headline decline of -3.3% in Factory Orders for the month of July. Core capital goods orders saw a 1% gain, core shipments up 1.2%, both of which point to accelerating strength for third quarter business investment.

Data outside of the factory sector showed continued strength as the ISM Non-Mfg Index was in-line with expectations at 55.3. All components were healthy, and it is important to note that prices are showing some welcomed upward pressure. The report pointed to a solid second half for the bulk of the economy.

International Trade data for July indicated the nation’s trade deficit widened slightly; the goods deficit was unchanged, while the services surplus fell -0.8% from the prior month. While exports as a whole fell, there was a $1.1 billion rise for aircraft. Imports of petroleum declined -$0.9 billion. Data from country to country was mixed.

Labor market data was hurt in the week, Jobless Claims spiked as the damage from Hurricane Harvey took its toll on the Texas labor force to the tune of 50K new claims. The 298K total claims for the second week in September was a 62K increase from the prior week, and it is expected that initial claims will remain elevated for the next several weeks as hurricanes continue to batter the southeast U.S.

Of Note

Vice Chairman of the U.S. Federal Reserve, Stanley Fischer, announced plans to resign in mid-October for personal reasons. His departure from the Fed’s seven-member board will give President Trump a new opportunity to reshape the board by nominating Fischer’s replacement.

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